Lisa S.A. v Leamington Reinsurance Company Ltd and Avicola Villalobos S.A.

• Jurisdiction: Bermuda
• Judge: Kawaley, J.
• Judgment Date: 05 September 2008
• Court: Supreme Court (Bermuda)
• Date: 05 September 2008
• Docket Number: Commercial Jurisdiction 1999 No. 108 & 2001 No. 79

Supreme Court

Kawaley, J.

108 of 1999; 79 of 2001

Lisa S.A.

and

Leamington Reinsurance Company Ltd. and Avicola Villalobos S.A.

Appearances:

Mr. Narinder Hargun and Mr. Paul Smith, Conyers Dill & Pearman, for the plaintiff.

Mr. John Riihiluoma, Appleby, for the first defendant.

Mr. Jan Woloniecki and Ms. Shade Subair, Attride-Stirling & Woloniecki, for the second defendant.

Company Law - Conspiracy to defraud — Whether the defendants participated in a fraudulent scheme to defraud the plaintiff of its profits — Intention to injure plaintiff not established — Whether there was a breach of trust or fiduciary duty owed the plaintiff.

Kawaley, J.

1 Strong parents have strong children and strong children have strong opinions, and that usually leads to conflicts that they have difficulty in reconciling”, Atlanta Mayor Andrew Young recently observed in relation to a litigious dispute between members of his city's most famous family. This observation might well explain the emotional underpinning of the present dispute. The trial of the present action, which commenced almost a decade ago, arises out of a commercial family falling-out amongst members of a prominent Guatemalan family, a dispute which has also spawned litigation in at least three other forums.

2 In my Ruling of February 10, 2006 [On the trial of preliminary issue and the plaintiff's application for leave to re-amend its Statement of Claim], I described the history of the present actions as follows:

• “1. On March 26, 1999, the plaintiff issued a Generally Indorsed Writ of Summons in Civil Jurisdiction 1999: 108 against the defendants herein. The claim was a derivative proprietary claim against the first defendant on behalf of the second defendant, who was joined to meet the procedural requirements under Bermuda law in relation to derivative claims brought by a shareholder on behalf of the company whose shares the plaintiff holds.

• 2. On the day the Writ was issued, Mitchell, J. granted a Mareva injunction. The first defendant (“Leamington”) provided discovery on April 28, 1999. The plaintiff (“Lisa”) applied ex parte for leave to serve the second defendant (“Avicola”) out of the jurisdiction on May 14, 1999, but did not obtain such leave until Simmons, J's Order was granted on December 23, 1999. In the meantime, Leamington had both applied to set aside the Mareva injunction on October 15, 1999, and obtained directions in relation to its application from Wade-Miller, J. on November 4, 1999.

• 3. On January 26, 2000, Leamington applied to strike-out the action, with directions being ordered by Storr, A.J. on February 10, 2000. On March 22, 2000, Lisa filed its Statement of Claim, and on July 31, 2000 applied ex parte to renew its Writ. The renewal order was granted that day by Simmons, J. but Avicola applied to set aside that Order on July 31, 2001. Directions were given by Meerabux, J. on February 1, 2001. Lisa sought to sidestep a potentially fatal attack on action 1999: 108 by issuing a similar Generally Indorsed Writ in Civil Jurisdiction 2001: 79 on March 2, 2001, in which fresh action both defendants in due course entered appearances. On March 26, 2001, Lisa applied for leave to serve Avicola outside the jurisdiction, which application was granted by Mitchell, J. on April 5, 2001. On April 9, 2001, Lisa applied to consolidate both actions.

• 4. This fancy legal footwork bore fruit when on June 7, 2001, Mitchell, J. set aside the ex parte writ renewal order on Leamington's application, but also granted Lisa's consolidation application. On November 8, 2001, Ward, C.J. granted Lisa's June 25, 2001 application for leave to amend its Statement of Claim. On February 15, 2002, Leamington filed its Amended Defence and Avicola its Defence. One year and nine months later, after filing a Notice of Intention to Proceed on October 3, 2003, Lisa applied on November 20, 2003 for Further and Better Particulars of Leamington's Amended Defence. I granted this application on December 4, 2003, and the relevant particulars were given on January 2, 2004. It was only after these numerous initial interlocutory skirmishes, that battle was joined on the issues which presently fall for determination.

• 5. On September 3, 2004, the defendants applied for the trial of two preliminary issues, and after ordering directions on September 23, 2004, Ground, C.J. granted the application on December 2, 2004. On February 17, 2005, Lisa applied for leave to re-amend its Statement of Claim, again with a view to fending off a potentially lethal attack on its claim by the defendants. And on April 6, 2005, Wade-Miller, J. ordered, inter alia, that both applications should be heard together.

• 6. The three parties, musketeer-like, have moved their legal sword-play from one battleground to the next, with various interlocutory applications being heard over nearly seven years by eight different first instance judges. None of the interlocutory applications to date appear to have given rise to either a considered judgment or any appeal. The above summary does not include related proceedings which have taken place in the British Virgin Islands, Florida and (it seems [The defendants' counsel suggested that Lisa had filed over 100 suits against Avicola and related entities in Guatemala; proceedings in the other two jurisdictions were directly referred to in evidence]) Guatemala as well. The defendants assert that they have been more proactive than the plaintiff in this litigation, and invite the court, in addition to other arguments, to have regard to the law of limitation and the doctrine of laches, or delay.”

3 On March 10, 2006, I resolved a preliminary issue in favour of the defendants, but granted leave to amend to the plaintiff in the following terms :

“137. The plaintiff is granted leave to re-amend to assert those claims which I have found to be arguable, but not in the form of the draft RASC presently before the court. The theory of direct liability on which the plaintiff now relies should be incorporated into a further draft RASC to meet the concerns which I have sought to clearly identify above…”

4 The defendants appealed against this Ruling, and the plaintiff cross-appealed against my decision that it had no standing to pursue a personal claim against the first defendant, having heard extensive evidence on Guatemalan law. On November 22, 2006, the Court of Appeal dismissed the defendants' appeal against my decision to permit the plaintiff to amend its Statement of Claim, and allowed the plaintiff's cross-appeal against my resolution of the preliminary issue in favour of the 1st defendant based on the Amended Statement of Claim. The Court of Appeal apparently took the view that since various claims against the 2nd defendant were going to be tried, it was undesirable to decide the overlapping issue of the 1st defendant's liability in isolation from the totality of the evidence to be adduced at trial against the 2nd defendant, although they expressed doubt as to whether the preliminary issue had any further relevance. To my mind my February 10, 2006 Ruling on the standing of Lisa to advance a personal claim against Leamington based on the pleadings as they were prior to the RASC has no present significance whatsoever. The merits of the claims against Leamington fall to be determined on their merits based on the case advanced in the RASC.

5 The 2nd defendant did not contend before me in March 2006, nor (seemingly) the Court of Appeal in November, 2006, that the amendments should be refused because the averments were liable to be struck-out on the grounds asserted in the strike-out applications it filed on June 14, 2007. The attempt to strike-out the Re-Amended Statement of Claim altogether was, save for one pleading complaint which could not have been previously raised, difficult to comprehend. The Re-Amended Statement of Claim (“RASC”) was filed on March 15, 2006, so the 2nd defendant had an adequate opportunity to contend before the Court of Appeal last November, that the amendments ought to have been refused because the proposed re-amended pleading was itself liable to be struck-out on abuse of process or other grounds. These points were not taken. It may have been reasonable for the 2nd defendant to simply focus on dismissing the subsequently abandoned derivative claim, but these strike-out points, if serious, could have been advanced by the 1st defendant at an early stage of the action. And if these issues only became relevant to Avicola when the personal claim was first asserted, it was first asserted in February 2005, when the application to re-amend was filed.

6 The second limb of the total strike-out application was, however, based on an averment only made in the plaintiff's Reply to the Re-Amended Defence of the 1st Defence filed on February 22, 2007. But the plaintiff voluntarily gave further and better particulars of this aspect of its case, with a view to meeting the 1st defendant's complaints.

7 The partial strike-out application was, delaying tactics apart, no easier to comprehend. The complaint that three “background” frauds were not relevant to the plaintiff's claim sought to strike-out portions of the RASC which had been pleaded from the outset in 1999. This point was not taken before me or the Court of Appeal in 2006, let alone in the previous six years of the litigation. The paragraphs of the RASC attacked, 8–11 and 15(i),(iii), were pleaded in the original Statement of Claim served in 2000. At the very latest, this point ought to have been taken, assuming it to be serious, as part of the 2nd defendant's opposition to the plaintiff's application for leave to re-amend.

8 Although the 2nd defendant consented to pre-trial directions on March 13, 2007, it was less surprising that its new separate attorneys, who came on the record on April 26, 2007, should raise a point which had not...